Study: Colorado checking account fees high, but national average higher

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David Migoya
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October 9, 2012 @ 3:57 pm
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Colorado Business,General,Uncategorized |
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Though more Coloradans with checking accounts are likely to pay a monthly fee compared to the rest of the country, that fee on average is less than what others are charged, an analysis of bank checking account practices by The Pew Charitable Trusts shows.

And for those chronic overdraft users who bear the highest fees, they’ll pay less in Colorado on average than the rest of the nation, even under the worst-case scenario, the analysis found.

Of the 12 large banks whose account practices were surveyed — amounting to 45 percent of all deposits nationally — the list includes some of Colorado’s largest banks in terms of market share: Wells Fargo Bank, U.S. Bank and JPMorgan Chase. FirstBank, the state’s second-largest in market share, was not part of the analysis, nor were credit unions and very small institutions.

The objective was to show how consumers were less able to comparison shop for a checking account as they could a can of soup.

“There’s the reasonable costs and summary disclosure that we’d like to see all financial insitutions use,” said Susan Weinstock, project director at The Pew. “It’s something consumers can understand and use to choose a product that works best for them. They can do it for a can of soup at the grocery story, reading labels of ingredients, but they can’t for their most used financial service — their checking account.”

Federally chartered banks located here appear, on average, to charge a greater number of fees other than the 12 most common, the Pew survey found. Nationally, banks on average levied 26 extra fees on checking accounts for a variety of different services or penalties. In Colorado, that average was 36, and the costs ranged from $0.25 to $125, about the same as the national average.

Still, Coloradans have to maintain a minimum balance of $5,000 in their checking account in order to waive any monthly charges — a $10 fee on accounts without free checking — while nationally the average balance was $2,000.

The study takes on renewed importance following a number of lawsuits nationally against banks, many of them settled, for their alleged practice of structuring check and debit card payments in a way that maximized the overdraft fees banks could charge.

By example, some banks would pay a customer’s checks and debit transactions in declining order, highest to lowest, rather than in sequential order or in real-time order, so that balances could diminish faster and overdraft charges would kick in sooner.

In Colorado, consumers on average faced $841 in overdraft fees in a single repayment period in the worst-case scenario with the maximum number of overdrawn checks and most days with a delinquent account. That’s significantly better than the national average, which was $1,013, according to the Pew analysis.

And when it comes to letting consumers know what to expect, fee disclosures on average were a 69-page morass nationally. In Colorado, it was 42 pages. Smaller, but not less daunting.

“It’s easier to locate a bank’s branch locations and ATMs than it is to navigate their terms and conditions,” Weinstock said.

The analysis is headed for the new federal Consumer Financial Protection Bureau, created as a result of the financial collapse and the conduct of banks and credit card issuers. The agency is accepting comments about overdraft fees and whether it requires regulation.